Inflation hits a three-year high... Trump's rising impatience with Iran... The Strategic Petroleum Reserve is headed for 40-year lows... Looking past today's volatility...
Inflation moved higher again in May...
This morning, the Bureau of Labor Statistics' consumer price index ("CPI") report showed that America's inflation hit its highest level since May 2023 last month. The CPI rose 4.2% year over year in May and 0.5% from April.
Both readings were in line with Wall Street's estimates, but they're not what the Federal Reserve – or the market – was hoping for.
Once again, energy was the main culprit. In May, energy prices rose more than 23% year over year, thanks to the ongoing conflict in Iran. Fuel oil was up 59%, while gasoline prices jumped more than 40%.
But even without energy prices, inflation is still getting away from the Fed...
On a core basis, ignoring energy and food prices, last month's CPI increased 2.9% year over year. Apparel and transportation services both rose more than 4% from May 2025, while shelter and medical services were both up more than 3%.
That's now the third straight month of increasing core inflation, with core CPI at the highest level since September. In short, inflation – both on a headline and core basis – is moving further and further from the Fed's goal of 2%.
That just confirms what we've been writing in recent weeks... The Fed's focus must shift away from the labor market and back to inflation. With higher inflation comes higher interest rates – both from the Fed and the bond market.
This was the last inflation report before the Fed – and its new chair Kevin Warsh – comes together next week for its policy meeting. After today's inflation report, markets are still pricing in a "hold" for the next few meetings, followed by a rate hike in December.
But if we continue to get hot inflation reports – not just from energy prices but in core inflation, too – that timeline may move up. And as we wrote last week, higher interest rates can take the wind out of the sails of the market's high-flying, unprofitable tech companies.
If that wasn't enough bad news for the market, tensions with Iran ratcheted up again...
In a post on Truth Social, President Donald Trump said that Iran has been "all talk and no action." He said that because Iran's negotiators have taken too long to make a deal, the country must now "pay the price."
Later in the day, Trump continued the threats, saying that the U.S. would be "attacking them very hard."
Between these comments and yesterday's news that Iran shot down a U.S. Apache helicopter, the ceasefire is getting shakier and shakier. That's leading to increased volatility in both the stock and oil markets (more on that in a bit).
The Iran conflict is the main reason that headline inflation has taken off over the past few months. Iran and the U.S. are blockading the Strait of Hormuz, forcing energy companies to find other ways to transport the 20% of the world's energy supply that usually travels through the strait.
We could be coming up on a key timeline for oil before it shoots higher again. As we wrote in the June 1 Digest, ExxonMobil (XOM) Senior Vice President Neil Chapman predicted a significant inventory crunch within two to three weeks... as of late May.
And even as Energy Secretary Chris Wright said that traffic through the Strait of Hormuz is "very meaningfully" increasing, crossings through the strait are still down more than 90% from their pre-conflict levels.
We're more than a week past Chapman's comments. And nothing has changed in the time since. One may even argue that the president's recent posts and comments make Chapman's timeline a certainty.
We still face the threat of dangerously low reserves...
To try and combat high oil prices from the conflict, the U.S. – alongside several other countries – has put its emergency reserves to use. As the Commodity Supercycles team wrote in their May issue...
On March 11, the Paris-based International Energy Agency ("IEA") announced it is prepared to release 400 million barrels of oil as an emergency measure – including 172 million barrels from the U.S. Strategic Petroleum Reserve ("SPR").
At the time of that announcement, the U.S. SPR sat at about 415 million barrels and was at the highest level since September 2022. Three months later, and the SPR now has a little more than 357 million barrels of crude – after an 8-million-barrel drawdown in the week ending May 29.
All throughout May, the Department of Energy withdrew between 8 million and 10 million barrels per week from the SPR. At that rate, it will only take one more week for the SPR to be at its lowest level since August 1983 – when it was first being filled.
For now, the SPR releases are working exactly as they should. With the Strait of Hormuz closed, companies and countries need to find other sources for their energy needs. And releasing it from emergency storage can help keep a lid on prices.
But at some point, like ExxonMobil's Chapman said, those reserves get to a dangerously low level. So the releases from the SPR will have to slow down to keep more in the reserves... or stop altogether.
Either of those cases would put upward pressure back on oil prices. And that means headline inflation would continue heading higher as well.
The ceasefire and ongoing talks had investors hopeful that the worst was behind us. But the markets are starting to care about the headlines again... whether that be inflation, interest rates, or tensions with Iran.
If the U.S. follows through on its Iran threat, it could be an extension of the two-pronged gut punch already hitting markets – with continued high inflation and headline volatility from the conflict.
We saw a little of that in the market today... All three major U.S. indexes fell more than 1% – with the tech-heavy Nasdaq Composite Index (holding the companies most susceptible to higher rates) falling 2%. On the other side of the Iran-conflict trade, West Texas Intermediate crude jumped back above $90 per barrel.
That's not to say it was a straight shot lower for stocks...
Stocks opened lower on the inflation news and post from the president, but they rebounded throughout the morning and turned positive in the first hour of trading. But that didn't last long, with all three indexes heading lower into the afternoon.
That's exactly what we saw yesterday, with the S&P 500 Index falling throughout the day before rallying nearly 1.5% off its lows into the close.
And the CBOE Volatility Index ("VIX"), known as the market's fear gauge, jumped back above 20 – the key level showing investors are expecting big market swings over the next month.
As our colleague and Ten Stock Trader editor Greg Diamond shared in an update with subscribers today, the recent volatility doesn't change the broader market's trend. From Greg...
We've seen big spikes down followed by equally large rebounds over the past few trading sessions. Despite these wild swings, we're looking at a series of lower highs and lower lows.
But this environment – with large intraday swings – is exactly what Greg looks for when recommending trades. And he found an opportunity today. If you missed it, Ten Stock Trader subscribers and Alliance partners can read his latest recommendation right here.
New 52-week highs (as of 6/9/26): ASML (ASML), Alpha Architect 1-3 Month Box Fund (BOXX), Healthpeak Properties (DOC), Exelixis (EXEL), W.W. Grainger (GWW), Idex (IEX), Invesco High Yield Equity Dividend Achievers Fund (PEY), Public Storage (PSA), Ryder System (R), and UnitedHealth (UNH).
In today's mailbag, thoughts on the mega-cap IPOs and comparisons to the dot-com bubble that we wrote about yesterday... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Regarding hyped, egregious IPOs as the sign of the top... I think pets.com was the one for the Internet bubble. Awaiting this round's pets.com with bated breath but will likely only be obvious on hindsight." – Subscriber Vincent T.
Corey McLaughlin comment: Good point. The infamous Pets.com completed an IPO on February 11, 2000. The Nasdaq peaked almost exactly a month later, on March 10, 2000, and lost 78% from there through an ultimate low in October 2002.
And you're right, Pets.com is known as probably the biggest disaster of the dot-com bubble era. After raising around $82 million in its IPO, it declared bankruptcy just nine months later. By 2001, a visit to Pets.com would have taken you to PetSmart's website instead.
All the best,
Nick Koziol
Baltimore, Maryland
June 10, 2026
